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Could Opko Health Inc. Be a Millionaire-Maker Stock?

What it would take for this embattled stock to become a huge winner.

Longtime losers have the potential to turn into big winners. And there's no question that Opko Health(NASDAQ:OPK) stock is a longtime loser.

The stock is down more than 40% over the last 12 months. And it plunged nearly 70% over the last 10 years. There's also no getting around Opko's share price, which is up by a measly 7% since the company conducted its initial public offering back in 1995. Sure, Opko shareholders went on a joyride from mid-2009 to mid-2015, but it's been pretty much downhill ever since.

Could Opko Health, despite its dismal track record, actually be a millionaire-maker stock? Here's what it would take.

Image source: Getty Images.

Breakout for Rayaldee

Opko won Food and Drug Administration (FDA) approval for Rayaldee in treating secondary hyperparathyroidism (SHPT) in adults with stage 3 or 4 chronic kidney disease (CKD) in June 2016, with a commercial launch following in November. Since that time, the company has recorded a grand total in revenue for the drug of... $0. That's right -- despite being on the market for over a year, Opko hasn't booked any revenue for Rayaldee. Why? The company says that it can't estimate sales deductions and product returns yet.

While that's obviously bad news, there are reasons for hope. Opko now has secured reimbursement from payers representing roughly 68% of patients. Prescription volume is growing for Rayaldee. More nephrologists increasingly are prescribing the drug. The Kidney Disease Improving Global Outcomes (KDIGO) organization updated its standard-of-care guidelines for SHPT in patients with CKD stages 3 or 4 in a way that should create opportunities for Rayaldee.

Opko also has taken steps to improve the situation. The company doubled its sales force and expects to see the results from this expansion in 2018. Opko also struck a deal with Japan Tobacco to develop and market Rayaldee for the treatment of SHPT in non-dialysis and dialysis patients with CKD in Japan.

Even though the commercial launch of Rayaldee has been painfully slow, the drug still has significant potential. The unmet need in treating SPHT is huge. I'm not sure that Rayaldee will achieve the peak sales estimate of $700 million that some analysts initially predicted, but a breakout for the drug would light a fire beneath Opko Health stock.

Diagnostics delivering on potential

Nearly 85% of Opko Health's total revenue currently stems from its diagnostics business. The problem, though, is that diagnostics segment sales fell in 2017 from their 2016 levels. For Opko to succeed, its diagnostics unit must deliver on its potential.

Bio-Reference Labs (BRL) generates most of the diagnostics segment revenue. Opko brought in a new head of sales in 2017 to shake things up. BRL president Gregory Henderson recently resigned, with Opko now searching for his replacement. It's possible that new leadership could turn things around.

There's at least one bright spot within Bio-Reference Labs' business -- its GeneDx subsidiary that performs genetic sequencing. GeneDx could bring in more money in the future for Opko as it adds tests in new clinical areas and serves more patients.

Opko also has high expectations for its 4Kscore prostate cancer test. The company now has more BRL sales representatives promoting 4Kscore. Opko also began a direct-to-consumer marketing campaign that included regional TV ads. Both efforts could lead to higher sales for 4Kscore.

Pipeline victories

Even if sales for Rayaldee pick up nicely and the diagnostics business regains momentum, Opko also needs help from its pipeline. The company experienced a big setback in late 2016 when its experimental long-acting human-growth-hormone product (hGH-CTP) failed in a late-stage study in treating adults. It's not the end of the road for hGH-CTP, though.

Opko is currently conducting a late-stage study of hGH-CTP in treating children. This study is critical, because the pediatric segment represents around 80% of the commercial market for treatment of hGH deficiency. Opko has partnered with Pfizer(NYSE:PFE) to commercialize hGH-CTP if it ultimately wins approval.

As for use of hGH-CTP in treating adults, Opko and Pfizer haven't thrown in the towel. Opko completed a post hoc sensitivity analysis to evaluate the influence of some statistical outliers on the data from the failed late-stage study, and planned to meet with the FDA to discuss the analysis. It's still possible that Opko and Pfizer will be able to move forward with a regulatory filing.

Other key pipeline candidates for Opko include OPK88004, an androgen receptor modulator for androgen deficiency indications, and GLP1-glucagon dual agonist OPK88003. Opko expects to report results from a phase 2b study of OPK88004 in treating men with enlarged prostates by late 2018. The company plans to begin a phase 2b study of OPK88003 in treating type 2 diabetes in the first half of this year.

One other key ingredient

There also is one other key ingredient for Opko Health stock to become a millionaire-maker stock. That ingredient is time.

You could buy a large number of shares in Opko right now, but even if the company had nothing but good luck, you wouldn't become a millionaire anytime soon. However, given enough time and sustained business success, Opko Health could generate significant returns.

It's possible that the best is yet to come for Opko. The main thing the company needs to do now, though, is get some successes rolling.

Author

Keith began writing for the Fool in 2012 and focuses primarily on healthcare investing topics. His background includes serving in management and consulting for the healthcare technology, health insurance, medical device, and pharmacy benefits management industries.
Follow @keithspeights